Taxation Notes 02-08-23
Taxation Notes 02-08-23
Taxation Notes 02-08-23
GENERAL PRINCIPLES
Taxation - Taxation is the process or means by which the sovereign (independent State), through its law-making
body (the legislature), imposes burdens upon subjects and objects within its jurisdiction for the purpose of raising:
revenues to carry out the legitimate objects of government.
ASPECTS OF TAXATION
Aspects refer to “stages or phases” that are included or embodied in the term “taxation” such as:
1. Levying - creation of tax laws which will be done by the legislative body of the government
2. Assessing - determination of tax to be paid by the taxpayer.
3. Collecting – collection of tax due
PURPOSE OF TAXATION:
INHERENT POWER
(3) Inherent Power of the State:
1. Police Power. It is the power of the State for promoting public welfare by restraining and regulating the use
of liberty and property. It may be exercise only by the government. The property taken in the exercise of this
power is destroyed because it is noxious or intended for a noxious purpose.
2. Power of Taxation. It is the power by which the State raises revenue to defray the necessary expenses of
the government.
3. Power of Eminent Domain. It is the power of the State to acquire private property for public purpose upon
payment of just compensation.
2. Constitutional Limitations
a) Due process of law
b) Equal protection of laws
c) Rule of uniformity and equity in taxation
d) Prohibition against imprisonment for non-payment of “poll tax"
e) Prohibition against impairment of obligation of contracts
f) Prohibition against infringement of religious freedom
g) Prohibition against appropriation of proceeds of taxation for the
h) use, benefit, or support of any church
i) Prohibition against taxation of religious, charitable and educational entities
j) Prohibition against taxation of non-stock, non-profit educational
k) institutions.
l) Others:
▪Grant of tax exemption
▪Veto of appropriation, revenue, tariff bills by the President
▪Delegated authority of President to impose tariff rates
▪Non-impairment of the Supreme Court (SC) jurisdiction
▪REVENUE BILLS shall originate exclusively from the House of Representatives
▪Infringement of press freedom
▪Revocation of Tax Exemptions
Note: If the taxpayer is a non-resident alien not engaged in trade or business (NRA-ETB), his gross income,
within, will be considered as his taxable income.
TYPES OF INCOME
For income taxation purposes, the three (3) types of incomes subject to income tax are as follows:
▪Ordinary or regular income.
▪Passive income derived from Philippine sources; and
▪Capital gains subject to capital gains tax
Ordinary or regular income refers to income such as compensation income (salaries or wages), business
income, income from practice of profession, income from sale and/or dealings of property and miscellaneous
income and passive income other than those subject to final taxes and capital gains tax of the Tax Code, as
amended. Regular incomes are subject to graduated tax table (also known as basic or normal tax) as provided for
under Section 24(A) of the Tax Code, as amended.
Passive Incomes subject to Final Withholding taxes (FWT) are certain passive incomes from sources within the
Philippines as enumerated under Section 24(B) and 25(A)(2) of the Tax Code, as amended. These passive incomes
are not subject to graduated tax rate basic tax.
TRAIN LAW
On December 19, 2017, President Rodrigo R. Duterte signed into law Package 1 of the Comprehensive Tax
Reform Program (CTRP) also known as the Tax Reform for Acceleration and Inclusion (TRAIN) as Republic Act
(RA) No. 10963. The Law took effect on January 1, 2018.
The TRAIN aims to make the Philippine Tax System simpler, fairer, and more efficient to promote investments,
create jobs and reduce poverty. Along with this objective, the CTRP also aims to raise revenues that will fund the
President's Build, Build, Build Project that will sustain high and inclusive growth of the country; and finance
investments in our people through enhanced education, health and social services.
Other Changes:
o Inserts an additional provision under Section 100 of the NIRC of 1997, as amended, which provides that a
bona fide, at arm’s length and donative-intent free sale, exchange or other transfer of property made in the ordinary
course of business shall be considered as made for an adequate and full consideration in money or money’s worth and
is therefore not subject to the donor's tax.
o Deletes the provision exempting from the donor's tax dowries or gifts made by parents to each of their
legitimate, recognized natural, or adopted children on account of marriage.
NOTES:
▪Hybrid vehicles or vehicles powered by electric energy in combination with gasoline, diesel or any other motive
power shall be subject to 50% of the applicable excise tax rates on automobiles.
▪Purely electric vehicles and pick-up trucks shall be exempt from excise tax on automobiles.
▪Pick-ups shall be considered as trucks.
▪The term "jeep" was deleted from the definition of jeep/jeepney/jeepney substitutes which shall now read as
jeepney/jeepney substitutes.
For the period 2018 to 2020, the scheduled increase in the excise tax on fuel shall be suspended when the average
Dubai crude oil price based on Mean of Platts Singapore (MOPS) for 3 months prior to the scheduled increase of the
month reaches or exceeds US$ 80 per barrel.
Sweetened beverages using purely coconut sap sugar and purely steviol glycosides are exempt from this tax.
Beverages Covered:
-Sweetened Juice Drinks
-Energy & Sports Drinks
-Sweetened Tea
-Cereal & Grain Beverages
-Flavored Water
-All Carbonated Beverages
-Other Powdered Drinks not classified as Milk, Juice, Tea & Coffee
-Other non-alcoholic beverages, that contain added sugar
Beverages Excluded:
-All Milk Products, including Plain Milk, Infant Formula Milk, Powdered Milk, etc.
-Meal Replacement & Medically indicated Beverages.
-Ground Coffee, Instant Soluble Coffee, and Pre-packaged Powdered Coffee Products
-100% Natural Vegetable Juice
-100% Natural Fruit Juice
✔ Fuel Marking
Provides for fuel marking of petroleum products that are refined, manufactured, or imported into the Philippines,
and that are subject to the payment of taxes and duties and provides for the mechanism on how fuel marking will be
done including imposition of penalties for possible violations.
✔ Zonal Values
Inserts a provision on the automatic adjustment of zonal values once every 3 years and the publication or posting
requirement in order for the said adjustment in zonal valuation to be valid.
✔ Sweetened Beverages
The Food and Drug Administration (FDA) shall require all manufacturers and importers of sweetened beverages
covered by the law to put the required labeling with unique identification of exciseable sweetened beverages,
✔ Audit Threshold
Provides for electronic sales reporting system for taxpayers engaged in the export of foods and services and Large
Taxpayers at their own expense within 5 years from the effectivity of the Act.
✔ Electronic Receipts
Requires the issuance of electronic receipts of electronic sales/commercial invoices in lieu of the manual receipts
and sales/commercial invoices for taxpayers engaged in the export of goods and service, e-commerce and the Large
Taxpayers within 5 years from the effectivity of this Act and upon establishment of a system capable of storing and
processing the required data.